KUALA LUMPUR: Lower oil prices will positively impact most Southeast Asian sovereigns through a number of channels including trade and inflation, says Moody’s Investors Service vice-president and senior analyst Christian de Guzman.

“First, most Asean countries are net importers of crude oil and refined petroleum products. So, a fall in oil import costs will improve most current account balances, and compensate for lower export revenue growth in some cases,” De Guzman said in a report yesterday. “Secondly, the benefit of lower oil prices lies in the support they have provided to fuel subsidy reforms.”

De Guzman said the trade balance impact on Malaysia, which has a relatively small net exposure to petroleum compared to its large exports of liquefied natural gas (LNG), may be less immediate.

“The health of Malaysia’s current account surplus — which has already fallen to 4% of gross domestic product (GDP) in 2013 from 17.1% in 2008 — will likely depend on the follow-on impact of lower oil prices on LNG prices. The impact will be mitigated because much of the country’s LNG exports are secured by long-term offtaker contracts and are thus insulated to a certain extent from near-term volatility in the spot market,” he said.

De Guzman noted that the lower oil prices will likely weigh on revenue performance for Malaysia and Indonesia, as they will receive royalties and dividends from their national oil companies.

Meanwhile, De Guzman said the lower oil prices have offset inflation pass-through from currency depreciation and enhanced purchasing power and consumption growth across Asean.

This article first appeared in The Edge Financial Daily, on February 5, 2015.